If a bond is selling at a price higher than its par value, which statement is correct?
اگر بانڈ اپنی اصل قیمت سے زیادہ قیمت پر فروخت ہو رہا ہو تو کون سا بیان درست ہے؟
- YTM is higher than the coupon rate
- YTM is equal to the coupon rate
- YTM is lower than the coupon rate
- YTM is unrelated to the coupon rate
Explanation
- When a bond sells for more than its par value, it is trading at a premium.
- This occurs because the bond's fixed interest payments (the coupon rate) are higher than the current market interest rate (the yield to maturity, or YTM).
- Investors are willing to pay extra upfront for those larger interest payouts.
- Consequently, the total expected return over the life of the bond (YTM) drops below the stated coupon rate.
Related MCQs
- Experiment
- Event
- Outcome
- None of these
اس سوال کو وضاحت کے ساتھ پڑھیں
- 170
- 180
- 190
- None of these
اس سوال کو وضاحت کے ساتھ پڑھیں
- 1/2
- 1/3
- 1
- None of these
اس سوال کو وضاحت کے ساتھ پڑھیں
- 1/2
- 2/3
- 3/4
- None of these
اس سوال کو وضاحت کے ساتھ پڑھیں
- 0.125
- 0.12
- 0.1
- None of these
اس سوال کو وضاحت کے ساتھ پڑھیں
